Drug and Device Manufacturers Required to Report Payments to Physicians Under New “Sunshine” Regulations

Most manufacturers of drugs, devices, biological and medical supplies covered by Medicare, Medicaid and the Childrens’ Health Insurance Program (CHIP) will have to report to CMS all payments and transfers of value to physicians and teaching hospitals, according to an advance released copy of Final rule issued by CMS. Covered entities will have to report transfer and payments to physicians and teaching hospitals made from August 1, 2013 to December 31, 2013 by March 31, 2014. Those reports will be viewable by the public by September 30, 2014. Thereafter there will be yearly reporting of payments and transfers. The Final rule implements sec. 6002 of the Patient Protection and Affordable Care Act (PPACA)(P.L. 111-148). The “National Physician Payment Transparency Program: Open Payments,” created by this Final rule is one of many provisions in PPACA designed to create greater transparency in the health care market, according to a CMS news release.

Reporting Requirements

Payments or transfers of value include gifts, consulting fees, reimbursement for research activities, speaking fees, honoria, meals, travel, or cash. If any of these or similar items are paid to or transferred to a physician or a teaching hospital by a manufacturer or a group purchasing organization (GPO) they must be reported to CMS, according to a CMS fact sheet. Manufacturers operating in the United States that produce or prepare at least one drug, device, biological or medical supply that is covered by Medicare, Medicaid, or CHIP will have to make these reports. A covered drug or biological one that requires a prescription to be dispensed, and a covered device or medical supply is one that has premarket approval from the Food and Drug Administration (FDA). GPOs are entities operating in the United States that purchase, arrange for, or negotiate the purchase of covered drugs, devices, biologicals or medical supplies for a group of individuals or entities. A teaching hospital is any hospital that receives an indirect medical education (IME) or a direct graduate medical education payment. This includes psychiatric hospitals that receive IME payments.

Ownership Reporting

Physician ownership or investments in manufacturers or GPOs will have to be reported as well. Ownership of immediate family members such as a spouse; natural or adopted children, parents or siblings; stepparents, stepchildren, stepbrothers or stepsisters; fathers, mothers, daughter, sons, brothers, or sisters; grandparents and grandchildren; and spouses of grandparents and grandchildren is included in the reporting requirements.

Exclusions From Reporting

Excluded from the reporting requirements are product coupons, vouchers, and educational materials provided to patients, a loan of a covered devices under development for a period not to exceed 90 days, and items valued at less than $10.00 apiece when the aggregate amount of these items is less than $100.00. Payments to physicians who are employees of the manufacturers need not be reported either.

Reporting of payments or transfers of value made in conjunction with research on the development of a new drug, device, biological or medical supply will be delayed until the approval of the device or drug by the Food and Drug Administration or four years after the payment or transfer was made, whichever comes first.

Review, Fines and Preemption

Once CMS receives these reports, physicians and teaching hospitals will have 45 days to review the reports for accuracy before they are made public. Failure to report any information is punishable by the assessment of a civil monetary penalty (CMP) not to exceed $150,000 a year. Knowingly failing to report is punishable by a CMP of up to $1 million. State and local laws requiring reporting of the same type of information are preempted. The Final rule will be published in the Federal Register on February 8, 2013.